ITAA's Year 2000 Outlook
November 13, 1998                     Volume 3, No. 42

Published by the Information Technology Association of
America, Arlington, VA

Bob Cohen, Editor bcohen@itaa.org

Read in over 80 countries around the world

ITAA's Year 2000 Outlook is published every Friday to
help all organizations deal more effectively with the
Year 2000 software conversion.  To create a
subscription to this free publication, please visit
ITAA on the web at https://www.itaa.org/transact/2ko
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visit https://www.itaa.org/transact/2kremove.htm.


ITAA's Year 2000 Outlook is sponsored in part by CACI
International Inc., DMR Consulting Group Inc., and
Y2Kplus

Expert Questions Y2K Costs

Good news.  The Year 2000 may be a cheap date.  Or at
least a much cheaper date than some experts predicted.
A recent survey shows that companies are spending far
less to fix Y2K problems than the amounts they
previously budgeted.  With organizations ex pecting to
pay up to 30 percent of their overall IT budgets to
make the calendar correction, the research reveals many
are making it happen at a fraction of the cost.  More
on the order of eight to nine percent of budget.

That's one of the major findings in Dr.  Howard Rubin's
most recent Industry Watch Survey, conducted on behalf
of Cap Gemini America.  Rubin is a renowned academic,
researcher and consultant who builds his benchmark
studies by regularly polling 426 organiz ations
worldwide, including 114 Fortune 500 companies and 13
government agencies.

Rubin suggests companies may have over budgeted for the
Year 2000 because the conventional wisdom on the cost
for line of code conversion is off--way off. “Look at
the Gartner Group,” Rubin says. “They said the unit
cost of a line of code could go as hi gh as $3.
Instead, the real market unit cost is 22 cents.” Rubin
says this price is based on advertised rates from a
number of vendors for factory-based remediation and
includes scanning, fixing, and unit and system testing
a line of code.

Why so cheap?  Rubin says powerful tools and a
saturated marketplace have knocked prices down, leaving
companies-and the world--with the possibility of a
healthy budget surplus.  Consider the math.  If the
code fixing portion of a Y2K program is 20 percen t,
than code fixing accounts for $120 billion of the often
cited $600 billion worldwide Y2K repair bill.  Even if
organizations used $1 per line of code as their
benchmark, that's still a global savings of roughly
$100 billion.

Rubin admits that not all of the $100 billion may be
gravy.  He says the large representation of top tier
companies in his survey may pour in a ladle or two of
bias into his sample.  Rubin also indicates that some
of the bucks not spent for code remedia tion may still
eventually go for things like contingency planning and
creating Y2K command centers.

However, other data points in the survey seem to
support Rubin's cost savings contentions.  For the
first time in his quarterly polling, for instance, the
number of companies claiming to underestimate their Y2K
costs dropped, if only from 87 to 85 percent .
Conversely, the number of organizations claiming
on-target program estimates jumped from 2 to 8 percent.

Not all that glitters in the new survey results may
turn out to be golden for companies performing these
projects.  The odds against on-time completion, for
instance, may be mounting as more organizations see
their milestone schedules skid towards the cen tury
wall.  The survey finds such slippage increasing for 90
percent of those polled.  Results indicate that the
software, financial services and manufacturing
industries appear to be doing the best job at holding
to schedules, while local, state and fede ral
government agencies are trailing the parade.  The study
shows fewer companies are expecting to have 50 percent
of their systems renovated and tested by the end of
this year and almost all are predicting a major
increase in system failures for next yea r.

Rubin says that because of schedule slippage, the
overflow of work from 1998 will leave firms in 1999
facing a formidable challenge. “Companies will need to
finish their systems stuff, complete contingency plans,
perform testing--it's going to be difficu lt to do it
all at once,” he predicts.

Even so, companies appear to be more inclined to face
the slings and arrows of their Y2K fortunes with less
help from outside consultants.  The shift from
outsourcing to in-house conversion grew five percent in
the latest quarter (up to 75 percent of res pondents),
while those signaling their intention to move work
out-of-house remained flat.  The percentage of those
firms intending to conduct assessments with consultants
but perform the conversion in-house has more than
doubled in the period between Apri l 1997 and September
1998, from 12 to 25 percent.

But that doesn't necessarily mean more Y2K date fixers
are going on the payroll.  The percentage of firms
saying they will increase staff dropped from 78 to 65
percent in the last quarter, a decline Rubin ascribes
to crunch time.  As more companies enter the testing
phase of their conversion projects, fewer professionals
are available with the requisite software testing
skills.  In the final furlong, Rubin (who chairs the
Computer Science Department at Hunter College) says
success is about higher qualific ations, not additional
bodies.

Also of interest in the Rubin results, half of those
polled say their firms have established business
accountability for managing the Year 2000 situation, up
from 12 percent in the preceding quarter.  No business
sector ranks Y2K as a top five business pr iority,
although it is the top priority within IT departments,
both in the U.S. and worldwide.

Y2K Added to Bilateral Agenda

Y2K is about more than date boundaries.  Chile and
Argentina will be sitting down next month in part to
discuss how the Year 2000 will impact the world's
second largest international border.  A joint
commission between the two South American countries has
met on issues of common concern for many years.  For
the first time, Y2K will be added to the agenda.

That's because Chile and Argentina not only share a
frontier but a transfrontier infrastructure, including
oil and gas pipelines, power lines, an optical fiber
line, transportation system, 56 border crossings with
immigration, customs and security control s and more.
The web of interdependencies goes beyond the 4,500
kilometer border.  For instance, virtually all
Argentine exports headed for Asia leave from Chilean
ports.  And electric power in Argentina is generated by
Chilean companies.

Problems on either end of a common pipe or power line
could mean problems for both countries.

Rodrigo Moraga, Director of Internal Audit in the
Cabinet of Chilean President Eduardo Frei Ruiz-Tagl, is
heading up his country's national outreach efforts.  He
says the joint commission will move from an inventory
of cross border interdependencies to th e assignment of
responsibilities, creation of a reporting structure,
and bilateral testing. “Year 2000 presents an
opportunity for real cooperation between countries,” he
says, “There's nothing hidden behind the curtain.  I
will work normally only if my [international] associate
does too.”

Because President Frei is an engineer by training,
Moraga says the chief executive instantly realized the
ramifications of the Year 2000 problem and has been
pushing his presidential counterparts in the Rio Group
and elsewhere to mobilize on the Y2K issue . Moraga
also credits Frei for pushing a multilateral approach
to the situation through the Mercorsur Trade Bloc.
(Mercorsur member countries discussed the issue at a
meeting in Buenos Aires last August; a follow-up
meeting is planned by the end of this month).

Talking is not doing and Moraga concedes that Chile can
go only so far in encouraging its international trade
and infrastructure partners to get with the program.
These are, after all, sovereign states, he says.
Countries will have different priorities, levels of
management effectiveness, degrees of regulatory
authority, amounts of Y2K exposure and program
sophistication, as well as available funds to pay the
national repair tab.

Moraga is hoping that the power of the media will help
build common cause among his international neighbors.
Chile will be working with WorldNet and the
Organization of American States to orchestrate a series
of programs starting in December on how Y2K w ill
impact the healthcare, banking, and energy industries.

FCC Probes Readiness of Customer Premises Equipment

A witness at a Federal Communications Commission (FCC)
hearing held this week said as little as 15 to 20
percent of customers may be checking the Y2K readiness
of their on-site telecom equipment.  Nortel official
John White was one of several vendors, cus tomers and
industry representatives speaking at the event.  Others
warned the FCC of supply problems as customers move to
pull the plug on old, out of date systems.  They also
said customers of older telecom equipment may call for
software fixes, only to find their manufacturers out of
business.

“Based upon information collected from manufacturers,
carriers and their customers, the Commission is
particularly concerned about the extent to which these
unprepared components and software may be found in the
telecommunications equipment,” said Michael Powell,
Chairman of the FCC Year 2000 Task Force.  Powell said
the bug could disrupt the voicemail and fax machines of
customers, and cause problems in private branch
exchanges, telephone call centers, local area networks
and private networks.

Georgetown University Telecom Manager Mary Campbell
offered the Commission her organization's success
story.  Campbell said the university and medical center
operates a dedicated network with five Lucent Definity
G3 switches.  Campbell expects conversion of the system
to be completed by January, allowing an entire year to
test.  Campbell said the university had budgeted $1
million for repairs but found that existing maintenance
agreements lowered costs.

Another concern aired during the hearing was the
possibility that Y2K-related errors in customer
premises equipment may cause erroneous information to
infect the public switched network.  One of the largest
problems in this area is the potential impact su ch a
bad data “infestation” would have on customer billing,
call tracking and other value added systems.

Business to Business

Unisys, Blue Bell, PA, has been awarded a $2 million
contract by Nationwide (UK) to implement a Y2K
compliant desktop strategy throughout the organization.

CCD Online Systems, Inc., Arcadia, CA, has announced
that their tool, Beyond 1999/Validate 4.0, has been
selected by the U.S.  Customs Service to perform IV&V
on 22 million lines of previously remediated COBOL
code.

Safetynet, Inc., Springfield, NJ, has announced the
availability of the international version of Yes2K,
their software utility that automatically detects and
corrects Y2K incompatibilities in PC hardware.

ConSyGen Inc., Phoenix, AZ, has won a contract from
Ciber, Inc. to provide Y2K and appraisal services to
their client, The State of Georgia, Department of
Education.

ITAA Y2K Information Center

Solution Providers Directory
http://www.itaa.org/script/2000vend.cfm

ITAA*2000 Certification Program
http://www.itaa.org/2000cert.htm

Outlook Archive
http://www.itaa.org/script/get2klet.cfm

Legislative and Litigation Table
http://www.itaa.org/Y2Klaw.htm

Calendar
http://www.itaa.org/y2kcal.htm

Vendor/User Status Questionnaires
http://www.itaa.org/questmain1.htm


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